It is a waiting game at the moment in the recovered fibre market. It is like waiting in a reception room for something to happen and you are just killing time.
Nobody is quite sure what the next few months will bring because energy prices are a worry. This is not just for consumers, but for mills, retailers and manufacturers too. There is bound to be less cash in the economy and this potentially has an impact on our sector.
Since Brexit, we have been on a monthly trading pattern, and we get a brief flurry of activity at the end of each month, and then it tends to go quiet.
Partly, this is down to the haulage issues that remain a challenge, even if we don’t really discuss it much anymore.
It might not be until the end of this month, maybe even the end of October, before we get a sense of where the market will be for the remainder of the year, and whether we’ll get the traditional busy period up to Christmas.
What we have seen though is a high PRN/PERN price and this has supported the market, keeping OCC prices high. Although it doesn’t get full 100% support, mixed paper still benefits from around a third of the PRN/PERN price and that helps.
But there is no doubt that prices have come down, and the underlying price is even lower. This is despite a beneficial exchange rate for exporters.
UK mills are quiet, while European mills are surprised at how high UK prices still are. Of course, the PRN/PERN helps to explain this.
However, I still believe there isn’t much material to go around and that could also help explain why UK prices have been high.
For obvious reasons, mills won’t say what their stock levels are like, but I would guess they have enough for September. But October is different and perhaps they will need to keep stocks healthy for the Christmas period, especially if sourcing recovered fibre remains a struggle with low arisings.
It has also been the case that some mills have experienced downtime in recent months, and there may be more on the way. But to remain viable, how long can these downtime periods last? It is a temporary solution, but these mills need to operate to make money.
If you were to ask me how the market will be for the remainder of the year, I could give you a best guess. I suspect that the lack of recovered fibre being collected will provide some stability, but it is more likely to be at levels we saw prior to recent record prices.
Much will also depend on the PRN/PERN price of course, and the monthly and quarterly data will have a strong impact on that.
But what is for definite is that the economy is going through a tricky patch, and we will not be immune from that.
Chris Burton is commercial director at IWPP
